3. National Health Insurance Act (NHIA)

National Health Insurance aims to improve public health and social security by providing insurance benefits for the prevention, diagnosis, treatment, and rehabilitation of injured and ill people, as well as assist with costs of childbirth and death, and promote health(Article 1 of the NHIA). National Health Insurance is a compulsory insurance that is divided into workplace and regional insurers. Currently, it covers about 97% of all citizens, with other medical services covered under the Medical Benefits Act, which is a form of public assistance for beneficiaries of the Basic Livelihood Subsidy. The self-employed who do not employ workers, daily workers employed for less than one month, and part-time workers who work less than 60 hours a month are not required to subscribe.

The insurance premiums for subscribing workers are an amount calculated by multiplying the standard monthly salary by the premium rate, with 50% of the premiums borne by workers and 50% by employers(Article 69). Therefore, the premiums are paid according to the individual’s standard monthly salary.

Long-term care insurance is a social insurance system separate from National Health Insurance. It was introduced in July 2008 due to aging of the population and the necessity to care for the elderly. It provides essential care services such as face washing, bathing, meals, assistance with using the toilet, and nursing care for elderly persons unable to move alone due to age-related diseases such as dementia and stroke. Long-term care insurance premiums are equivalent to 8.51% of National Health Insurance premiums.

(1) Application to foreign workers

All business and local subscribers covered by National Health Insurance are required to pay premiums. However, foreign workers(E-9) and visiting Korean workers(H-2) under the employment permit system in the Foreign Employment Act and in Article 7(4) of the Long-Term Care Insurance Act can be exempted through a separate application process through a nursing care insurance subscriber. All other foreign workers who do not have a basis for exemption are automatically subscribed to long-term care insurance and pay the premium along with the health insurance premium.

(2) Related issues

Foreigners and overseas Koreans are eligible for health insurance if their status of residence is recognized by relevant laws. Employers of native English instructors are required to subscribe for the 4 social insurances, but they often fail to do so for National Pension and National Health Insurance. This is because there is no real penalty for failing to subscribe to National Health Insurance. If non-Koreans are not workplace subscribers, they must be classified as local subscribers and join the compulsory system. However, if they sign contracts with new employers every year, they will not be protected as a local subscriber because their place of residence is unclear.

Article 109 of the NHIA, paragraph 4, states that foreign workers who are staying illegally are not covered by health insurance. Although Korea has about 366,500 illegal workers as of June 2019, this exclusion means they(and their families) find it difficult to receive adequate care for chronic conditions, childbirth and other health events due to the cost of medical care. Medical insurance should also cover illegal workers so as to guarantee the basic rights of human beings.


4. National Pension Act (NPA)

The National Pension Scheme is a system that pays old-age pensions to citizens who reach a certain age, or pays the pension to the citizen’s family if the pensioner is disabled or dies(Article 1 of the NPA). The National Pension Scheme was enacted on January 1, 1988, when the NPA came into effect. Initially, it applied only to workplaces hiring 10 or more workers, but then gradually expanded to every company.(Article 6). However, civil servants, soldiers, and private school workers subject to the Civil Service Pension Act, the Military Pension Act, and the Private School Pension Act, respectively, are excluded from membership. The National Pension Plan is divided into workplace subscribers and regional subscribers, and subscription is mandatory for workplaces that use one or more workers at all times. Excluded from workplace subscribers are the self-employed who do not employ workers, daily workers employed for less than one month, non-employed workers, or part-time workers who work less than 60 hours a month. Premiums are in proportion to income, with 50% borne by the worker and 50% by the employer. The types of benefits under the NPA include old-age pension, survivor’s pension, disability pension, and lump-sum refund.

(1) Application to foreign workers

Foreigners working in workplaces are subject to the National Pension Act(Article 126) and foreign nationals residing in Korea shall, of course, become business or regional subscribers. However, if the law equivalent to Korea’s NPA in the foreigner’s country of citizenship does not apply to Republic of Korea nationals living there, the principle of reciprocity applies. Those not covered by the National Pension Scheme are those here on temporary stay visas or without income.

National Pension applies to foreign nationals when they are employed at a workplace that must subscribe to it. To receive the pension benefit, the foreign national must have paid into the national pension for at least 10 years and reach the age of 60. This is not easy for most foreign workers to do. In this case, a lump-sum refund will be given, which will be handled in accordance with the social security agreement Korea has with that national’s country of citizenship. Lump-sum refunds are only given to those nationals from countries with such social security agreements with Korea(see Table next page).

However, since most of the sending countries in the employment permit system do not have social security agreements with Korea, most foreign workers are ineligible for the national pension, so they cannot receive a lump sum refund. In this regard, the failure to receive lump sum refunds despite the inability to receive old-age pension benefits raises the issue of a serious limitation on property rights. It also pays foreign workers in countries that do not. In addition, the National Pension Act was amended in January 2015 in accordance with the decision of the Constitutional Court in recognition of the property value of national pensions(Article 126 of the NPA).




(2) Related issues

It is difficult for foreign workers to receive the Korean old-age pension because they must contribute for a minimum ten years and then reach the age of 60(Article 77 of the NPA). Therefore, foreign workers who do not meet these requirements can receive the national pension benefit as a lump sum refund when they leave the country.
Non-professional foreigners stay for a short time and most return to their home countries within three to five years. In this case, the national pension paid in the meantime will be received as a lump-sum refund. The national pension premium is 9% of a worker’s total income, with workers and employers each paying 4.5%. Therefore, application of the National Pension on non-professional foreign workers who are unlikely to receive the benefits is an additional tax on the employer. The old-age pension for non-professional foreigners with short-term stays cannot help them as they are leaving Korea before their eligible date.


5. Insurances Exclusive to Foreign Workers




(1) Departure Maturity Insurance

Departure Maturity Insurance replaces severance pay but accumulates at the same rate. It is payable when the foreign worker leaves the country (Article 13 of the Foreign Employment Act: FEA). The employer must pay a monthly premium of 8.3% of a worker’s monthly ordinary wage stated in the employment permit system (EPS). This is to prevent late payment of severance pay and is limited to non-professional employment (E-9) and visiting overseas Korean workers (H-2) in the EPS. Departure Maturity Insurance is operated in lieu of the retirement allowance under the Retirement Benefit Security Act (RBSA), with the benefits paid to foreign workers when their employment relations end and only if they have worked for at least one year at the same workplace. This second stipulation means that the departure maturity insurance is paid on the premise that the foreign worker is leaving Korea. The Constitutional Court decided that payment of severance pay when leaving Korea would be in line with the purpose of the Foreign Employment Act, even if retirement benefits were paid on the basis of departure, rather than on the premise of terminated employment relations. However, the Court’s dissenting opinion stated that severance pay should be paid within 14 days since it is a living wage.

Employers are obliged to subscribe to Departure Maturity Insurance, Guaranty Insurance for unpaid wages, Foreign Workers’ Care Insurance and Return-Expense Insurance. When an employer re-employs a foreign worker, he/she shall extend the existing insurance coverage period of the Departure Maturity Insurance and Guaranty Insurance for unpaid wages (Article 13 of the FEA).

If a foreign worker has worked for less than one year after the Departure Maturity Insurance is purchased, the insurance will not be paid to the foreign worker but return to the employer instead. insurance benefit will be returned to the. Since the departure maturity insurance is paid in lieu of retirement allowance, it must be paid within 14 days after employment relations end in accordance with Article 36 of the Labor Standards Act. However, due to the nature of the employment of foreign workers, such insurance must be paid out immediately after the foreign worker goes through airport security.

In order to prevent illegal stays, the Departure Maturity Insurance is only receivable when the foreign worker is at the airport to return home. However, if a foreign worker enters the employment permit system and changes workplaces several times in five years, it is discriminatory treatment that the Departure Maturity Insurance cannot be received because he/she did not leave the country. The Constitutional Court deemed the provision constitutional, explaining that it is a reasonable way to prevent human rights violations if foreign workers become illegal residents in consideration of the purpose of the Foreign Employment Act. However, the dissenting opinion states that “preventing the illegal stay of foreign workers is accomplished by setting the period of payment for the Departure Maturity Insurance, which has the property of retirement allowance, within 14 days of leaving the country. It is difficult to consider this justified because it does not take into account the nature of the retirement allowance.” Therefore, when a foreign worker changes workplace, it should be possible to receive the insurance money even if the worker does not leave the country.

(2) Guaranty Insurance

The employer is obliged to purchase Guaranty Insurance against late payment of wages for their foreign workers (Article 23). Since this Guaranty Insurance is paid to the foreign workers in lieu of the unpaid wages, the insurance company pays the unpaid wages first, then charges the employer for the amount equivalent to the paid arrears. Foreign workers whose wages have been unpaid must first report the fact to the Labor Office of the Ministry of Employment and Labor. However, there is a maximum payout of 2 million won. The amount of wages outstanding will be billed directly to the employer or processed in the same way as for Koreans who have not been paid their wages. In addition, even if a foreign worker receives all unpaid wages through the Ministry of Employment and Labor, it is questionable how effective the Guaranty Insurance will be if it is received through investigation of the Labor Ministry Office. Therefore, if the employer approves the unpaid wages, the wages should be paid to the foreign worker through Guaranty Insurance.

(3) Return Expense Insurance and Accident Insurance

Return Expense Insurance is mandatory to reduce illegal stays by encouraging foreign workers to leave the country when their period of stay expires and to help them have the money necessary for returning home (Article 15 of the Foreign Employment Act). Payment of insurance premiums must be made within 80 days of the date of entry (E-9 Non-professional Foreigners) or the start of the labor contract (H-2 Visiting overseas Korean Workers). The benefit shall not be paid for temporary departures, but only if the foreign worker leaves the country due to expiration of the employment contract or expiration of the status of residence.

Foreign workers (E-9, H-2 status of residence) must be registered for Accident Insurance within 15 days of the effective date of the labor contract in preparation for death, disability or illness unrelated to work (Article 23). Accident insurance premiums vary depending on gender and age. As insurance premiums are low, insurance benefits are limited. A maximum of 30 million won is paid if a foreign worker dies or acquires a disability, and 15 million won for illness. In other words, if you are hospitalized for a personal illness and receive surgery or long-term care, the benefits from this insurance are not enough to cover such large medical expenses.


6. Evaluation

The four main insurances for foreign workers are granted natural benefits. With Industrial Accident Compensation Insurance, there is insufficient compensation to workers injured/ill from industrial accidents at workplaces hiring fewer than five workers in rural areas. If Employment Insurance is voluntary and foreign workers become unemployed or find another job, most will be excluded from maternity leave or parental leave. Illegal residents are excluded from National Health Insurance coverage. Paying into the National Pension Scheme is mandatory for non-professional foreign workers (E-9), even though it is impossible, under the short-term visa system, for them to stay long enough to be eligible for the benefits. which is another burden that the employer should pay as the employer’s burden in premiums. So, the National Pension should be excluded from the mandatory social insurances.

In terms of insurances exclusive to foreign workers, there are many things needing improvement. Although the Departure Maturity Insurance, which is paid in lieu of retirement allowance, is paid on the premise of the worker leaving Korea, even if the foreign worker stays for a long time, he/she may not receive that money. Guaranty Insurance is also limited in effectiveness because it is provided on the premise that the Labor Office confirms that wages have indeed not been paid. The amount of reserves are so small and the limitations so great with Accident Insurance that the benefits are largely inconsequential. Insurance premiums need to be raised to a level that reflects the need.